Genocide Convention not considered by Central Bank when approving Israel Bonds

The Central Bank of Ireland does not consider the Genocide Convention when approving prospectuses for Israel bonds, the bank’s governor has said.

However, Gabriel Makhlouf said the intensity of the conflict in Gaza does put “a question mark over whether the financial viability” of Israel remains secure.

The Central Bank is the designated authority in relation to the sale of Israel Bonds in the EU, and has determined the securities meet the standards of the bloc’s prospectus regulations.

Israel Bonds have been advertised as supporting the country’s economy, and more recently, websites promoting the securities emphasise their role in supporting Israel’s military operations in Gaza.

Protesters and opposition parties have called for legislation that would give Ireland the power to refuse the sale of Israeli “war bonds” over human rights concerns.

They say the bonds are intended to fund the war in Gaza, while Ireland has an obligation under the Genocide Convention to use all means likely to have a deterrent effect on those suspected of preparing genocide.

An opposition motion calling on the Government to stop the approval of the securities was defeated on Wednesday night after Finance Minister Paschal Donohoe said the Government cannot introduce legislation that cuts across the independence of the Central Bank – adding that it would not be legal and that it would not work.

Earlier on Wednesday, demonstrators and opposition TDs rallied outside Leinster House as the head of the bank appeared before the Finance Committee.

Mr Makhlouf said the Central Bank must carry out the statutory tasks and functions it has been assigned.

He said it was “incorrect” to say the bank could refuse to approve the Israeli bond prospectus on the basis of international law rulings and opinions.

“The Central Bank cannot impose sanctions on Israel, for example by refusing to approve the Israeli bond prospectus, in circumstances where the EU has not imposed any such sanctions itself.”

Asked by Sinn Fein finance spokesman Pearse Doherty if the Central Bank subscribes to the Genocide Convention, the governor said the authority has to operate within the legal framework allocated to it, but added that the Genocide Convention does not feature in the EU prospectus regulation.

Pressed on whether it applied to the bank overall, Mr Makhlouf said “it applies to the state” and added that, with regard to approving prospectuses: “In that sense no, it doesn’t.”

Under similar questioning from Social Democrats’ deputy leader Cian O’Callaghan, deputy governor Mary-Elizabeth McMunn said: “Ireland is the contracting party under the Genocide Convention. It does not explicitly say the Central Bank is a contracting party under the Genocide Convention.”

Asked if he believed what was happening in Gaza was genocide, Mr Makhlouf said that was a legal concept determined by the ICJ and no one at the Central Bank could comment authoritatively as experts on that matter.

He added: “But what’s clear is that what is happening in Gaza is appalling, horrific.”

The governor said everyone at the Central Bank wants to see “an immediate end to hostilities by all parties”.

The Israel Bond prospectus is up for renewal in September.

Asked by Labour finance spokesman Ged Nash what factors the bank would be looking for in engagements with Israel at that point, Mr Makhlouf replied: “I think the intensity of the conflict in in Gaza probably does put a question mark over whether the financial viability of the state still remains secure.

“The fact that the European Union has indicated that it’s going to look at its co-operation agreement of Israel, I think that’s a factor. The fact that the [Israeli] finance minister has just been sanctioned by a number of countries, that may be a factor.”

He said it would be up to Israel to assess whether these factors affect its financial standing when putting together the prospectus, but added that the bank would be required to approve the next prospectus if all matters are completely disclosed.

Meanwhile, Mr Makhlouf said national restrictive measures could be imposed by the Oireachtas to stop the approval of the prospectuses, if they were consistent with EU law.

However, he said he would find it “difficult” to say that it is “possible” to do that in this case, because one member state acting on its own would undermine the whole prospectus regulation.

He said he had not taken legal advice on this and added that he was “not ruling out” the possibility.

“Prospectus regulation doesn’t just apply to states, it applies to corporates, it applies to anybody who wants to issue a regulation in certain circumstances.

“So what I’m not ruling out is the possibility that some domestic legislation could prevent an individual corporate being able to issue security in certain circumstances, but this is real hypothetical stuff.”

Mr Doherty asked if the Central Bank would deem the ICJ findings a “risk” for an investor who wishes to purchase Israel Bonds.

Mr Makhlouf said the case taken by South Africa against Israel was included in the September prospectus that was approved by the bank.

Gerry Cross, the bank’s director of capital markets and funds, added that it was the authority’s belief that it was articulated and disclosed to the level that is required.

Mr Cross later told the committee that the Bank had made approximately 13,300 euro in fees through its work relating to the bonds since October 2023.